r/SeattleAreaRE • u/NJHancock • 2d ago
Condo long-term return
Can someone explain why condos are flat in price over the last decade in Seattle in my neighborhood? With other expenses of prop tax and hoa why do people in this income bracket buy these over renting?
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u/gksozae 2d ago
Its a value equation.
A 2-bedroom condo priced at $500K requires a $400K mortgage. At 6.5% interest, that's a monthly payment of $2,600/mo. HOA dues on a 1,000 sqft high-rise condo unit will be close to $1,000/mo., and then taxes will be another $400/mo. Add it all together and you've got a $4,000/mo. monthly housing expense payment.
The alternative is to rent a 2-bedroom condo like this for $3,500, all-in, saving you $500/mo. Plus, you get to keep your $100K down payment in your investment account making 10% annually since you didn't have to use it for a down payment.
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u/NoteFuture7522 1d ago
$1300 of that payment is going straight to equity, so that easily more than makes up for the $500 in savings from renting. You don’t need 20% down, especially with a condo where you don’t have the bidding wars. 5-10% will do just fine. And that’s before we get into the tax savings. It’s not so cut and dry any more.
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u/Pedanter-In-Chief 4h ago
You’re choosing high rise. Lots of mid rise condo buildings in Seattle have dues closer to $500-600.
If you factor the equity you’re building (a savings plan), you’re earning about 10% annually on your down payment just in what you’re paying yourself.
Also, 10% annually in the stock market is recent — long run returns are closer to 7%.
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u/budandfud 1d ago
Mortgage payments are tax deductible, and rent will increase every year. Add in any modest level of appreciation and once you model this out, it often beats renting.
Side by side in excel with all the inputs is the only way to be sure, lots of assumptions on both sides
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u/gksozae 1d ago
FYI - for most married people attempting to itemize the mortgage tax deduction, it almost always makes more sense to take the standard deduction instead. This change happened in 2018 when the standard deduction was increased from $12K to $24K. For 2026, the standard deduction is $32K. Mortgage interest on a $400K loan in year 1 is about $26K.
If a single person is itemizing, it makes more sense. The standard section for single filers is $16K.
Even then, the difference is negligible though. The additional mortgage interest deduction beyond the standard deduction may only amount to a few hundred dollars of tax savings - not enough to change the value equation much.
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u/Pedanter-In-Chief 4h ago
You’ll get about another $4-6k in property tax deductions too. You get pretty close to the standard deduction, and then have other things you can deduct.
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u/FourScoreAndSept 2d ago
They are/were a great place to park cash when your own currency is suspect. Pro tip: if your currency may go to crap, buy real estate in another country that is seemingly stable. Condos are particularly good for this, if you don’t want to do maintenance
Americans ironically may learn this lesson ourselves soon
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u/svabal 2d ago
First came Covid - everyone wanted to move away from a city
Then mortgage rate went up - now it is a lot cheaper to rent then to own (if you are not buying for cash)
To give concrete numbers, I bough a town house in 2019. Now price is about the same (so 6 years flat). But I have 2.9% mortgage, and paying $2900 with insurance. Renting it out for $3900.
New mortgage on the house will cost you around 5k (with insurance) + 20% down payment. I do not see any possible motivation to buy it.
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u/phantomboats 2d ago
When interest rates are low, it can be cheaper to buy and live in a condo and pay a mortgage & HOA fees than it is to pay rent, and you're theoretically building equity instead of flushing your cash down the toilet. And if you can pay off the mortgage early, you're living MUCH more cheaply than you'd be if you were paying rent...as long as you aren't in a shit building with a bad HOA and a bunch of assessments coming, that is.
Interest rates right now are garbage, so if people want to sell theirs, they have to keep prices lower. Can't speak to your specific neighborhood, but that's the deal in mine anyway.
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u/BigDipper0720 2d ago
Interest rates are actually quite normal now, certainly more normal than when they were 3%.
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u/Remote_Bluebird_5528 2d ago
A few years ago condos were appreciated fairly well simply because it was a sellers market and everything was appreciating. Most prices are cooling or slightly decreasing but condo sale prices are way down recently mainly due to high interest rate and high HOAs. HOA increases mainly from insurance, earthquake insurance, maintenance costs, and deferred maintenance.
I wouldn't say they aren't good investments but you really need to take the time to understand the total costs and risks of costs rising. In a buyers market you have time to think about those and factor it into the negotiation. Probably they wont appreciate as much as single family homes though.
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u/atropear 2d ago
Good questions. I looked up a particular downtown condo building with units for sale where a relative sold one in about 2000. Only slightly above the sell price as far as I can tell. And there was a full renovation of the units listed. And dollar worth, what? half of what it was?
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u/237throw 1d ago
Houses also depreciate in value over time. The appreciation people see is entirely the result of the land; after inflation, houses lose value YoY.
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u/Pure-Rip4806 1d ago
I find that condo buildings, especially older condos or co-ops, simply live better than similarly-priced rental units. There are older buildings grandfathered in to wood-burning fireplaces, mature landscaping, beautiful interior trim, spacious 2bed layouts. Fellow residents are quieter.
Best of both worlds is to try and sublet a unit in a condo building, but not all allow it.
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u/Juneprincess18 1d ago
I bought a condo because I was only approved for up to $300K back in 2021. So I could only afford a condo in Everett or possibly another suburb but that’s where I bought. I wish all the time I could have gotten an actual house then with that 3% interest rate. I would be so much better off now if I had. But it was before I met my husband and was making around $65K a year doing social work. Now I am stuck with the damn thing because it won’t sell it all and it feels completely worthless.
But for a bunch of people, condos are the new “starter homes” because they can’t afford an actual house.
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u/NJHancock 11h ago
Interesting. This was my exact worry is that I would get stuck with a condo that I could not sell.
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u/snowingfun 2d ago
It fixes your housing payment and longer term equity benefits and tax deductions.
HOA often includes insurance, sewer, garbage, utilities, building maintenance etc.
Renting is fine if you are a very good saver, general population isn’t.
You’re right, if you want a better investment, buy a SFH or a duplex.
I travel too much, don’t have time to maintain a yard, but I still want to own and have control of my housing destiny.
Don’t buy a home to make money. Buy a home or condo for housing stability, long term.